Gross Margin

Gross margin means gross profit as a percentage of revenue. In simple terms, gross margin shows how much of each dollar of sales is left after direct production or delivery costs. Gross margin is important because it helps investors compare profitability across companies and over time. A higher gross margin may suggest strong pricing power, efficient production, or lower direct costs. For example, if a company has $100 in revenue and $40 in gross profit, its gross margin is 40%. Gross margin is not the same as operating margin. Gross margin focuses on direct costs, while operating margin also includes operating expenses.